In medium saucepan bring water and sugar to boiling, stirring to dissolve sugar. Remove from heat; cool slightly (about 20 minutes). Add basil and let stand 30 minutes more. Pour through a fine mesh sieve; discard basil. Stir lemon peel and juice into syrup. Pour into a shallow baking dish. Cover; freeze 2 hours (edges should be firm and center almost firm).
Transfer mixture, half at a time, to blender. Cover; blend until slushy, stopping to scrape down sides as needed. Spoon back into dish, spreading evenly. Cover; freeze 2 hours more or until firm.
To serve, with a small ice cream scoop scrape across surface of mixture. Place scoops in small dishes. Top with lemon slices, fresh mint leaves and/or edible flowers. Makes 8 servings.